Vietnam: Markets, Capitalism and Mr Smith’s sympathy.

Vietnam is the site of a rapidly emerging and evolving capitalism, something we may as well date to the introduction of Doi Moi (fn1) in the mid 80s.. Given my own interests, and continuing exposure to discussions about Adam Smith’s ideas on the marketplace and sympathy, it’s natural that my visit provoked some substantial thoughts on my part. 1

Despite my optimism, the marketplace remains disheartening for some

Commerical life is absolutely everywhere. It throngs the street and intermingles with private homes in a way that I don’ t think  has been seen in English speaking society since the demise of the old style public house of Pepys day, when they were merely people selling beer in their own home. The costs of entry for many industries, particularly those that are encountered in everyday life such as retail or services are also far lower than here due, both for reasons of regulation (including licensing) and an apparent lack of demand for genuine premises/uniforms and other peripheral aspects to what is being sold. Jane Jacobs would most likely approve.

As a result you’re vastly more likely to be dealing with a owner operator or a very small business than in Australia. This is interesting because it results in far greater prevalence of market behavior.  this means that you are interacting in the market with another person who is also operating in the market. This is largely not the case in Australia. Here you are more likely dealing with an employee. This means you are operating in a market, but interacting with a person who is operating in a firm, or corporation, which is then operating in the market. The social norms and incentives they face in the firm are different from those that are faced in the marketplace. The firm is influenced by the marketplace it is in, but the prevalence of market influence on social and economic behavior is lessened.

This raises a point. If Australia is somehow “more capitalist” than Vietnam, we are implicitly adopting definitions of  capitalism that incorporates far more than markets, such as the workings of corporations and other organisations. I think this is an appropriate range of definitions that should be understood explicitly far morethan it is. It carries implications such that “more capitalism” may mean “less market influence on society” and “more hierarchy/bureaucracy” which tend to confound traditional, and lazy command vs capitalism distinctions.

This also means that commercial behavior in Vietnam should be quite Smithian, since more of the people I would be interacting would be directly seeking to align my self interest with their own, rather than pursuing their interest through the organisation which they were a part and which I was dealing. Their ability to empathise with me and find a outcome that is better for both of us would be far more valuable than their understanding of corporate norms and hierarchy, albeit in an organisation that should benefit by empathising with me but was constrained by the form of its internal workings.

At first I had some skepticism (though not cynicism), not helped by the  fact our first encounter was with a scam running taxi driver. I also found haggling inherently disutilitous (it always felt like we were trying beat each other). Constant spruiking was also quite irritating, and the constant refrains of “Where are you going?” and “What are you looking for?”2 more existentially troubling than sympathetic.

But I came around (to some extent at least) quite quickly. I’ve never liked shopping much (though I love fleeting small talk with cashiers-a minor and inexhaustible joy of life), and been mystified by people that undertake it as recreation. But in Vietnam, barring the irritants above, I was quite enjoying it. If human connection is inherently enjoyable to humans, this did seem to be an environment that was promoting it. This was most apparent in Hoian which is noted for its large population of tailors. At the first tailor I went to I acquired a suit. I have no idea whether this woman was exceptionally skilled at anticipating what I wanted, or exceptionally skilled at convincing me that what she was offering was what I wanted and that it was my idea in the first place. It’s a much of a muchness, I am very happy with what I got (and what I paid) and the process was immensely enjoyable. At another tailor, whilst my wife was being measured for an ao dai, I was idlely examining a chinese shirt on display (linen, knotted cloth buttons and a Mao style collar). Discussion quickly revealed that I thought it would be good for the Austrlaian heat –  but that I preferred a Western Collar – but that a shirt with such a collar could be arranged – that I was realising that the shirt had begun to encapsulate the ideas of a perculiar and obscure architect and that I could add a custom stitch reflecting this. This took all of 5 minutes, and a few hours later I had a new shirt cheaper, better fitting and better made than most of my clothes, and more suited to my own desires. Moreover, this good was neither offered by the tailor nor searched for by me ex ante. It arose spontaneously out of the marketplace. This was also very entertaining, and similar examples happened multiple times.

But of course I also would far prefer to live in Australia than Vietnam. In part this must be to do with the presence of firms and corporations in our society, and it seems plausible these will become more prevalent in Vietnam. This leads me to some other observations and thoughts.

We stayed at a number of  small hotels and at one large luxury resort during our trip (as well as a boat and two trains). The service at the small hotels was exceptional. At the resort it was abysmal. At the small hotels English was excellent (as was their French and they also made considerable use of their limited Japanese with my wife). At the resort it was very difficult to be understood3, even making full use of my wife’s limited Vietnamese. The small hotels usually anticipated what we wanted, the resort struggled to understand (even discounted language barriers) even after long explanation and discussion. They were not surly, and they were genuinely friendly, but there was no connection happening, and service being sold suffered as a result.

Both the small hotels and the resort were firms, and the staff were operating in the firm rather than the market directly, just as workers in Australian firms whom I deal with. However, there is some connection, some sympathy even if much less exciting than the marketplace, in my interactions with the small hotel staff and most Australian staff, but not with the resort staff. It cannot be culture, as the small hotels show, nor can it be firm size alone, as some of the Australian staff show.

It must be the institutional quality of the firm’s operations – albeit something influenced by size. The resort staff had either the threat of discipline or the disapprobation of peers to contend with, or maybe self approbation to at least look attentive. These proved very ineffective in leading them to understand us however. It may be because the report’s processes were designed by its owners, who designed something that needs to evole or it may have imported (as a foreign corporation) institutions that didn’t work with native Vietnamese institutions. Also likely is that the institutional elements required by larger firms simply haven’t evolved in Vietnam the way they may have here yet.

The small hotels have less staff and probably could adapt, create and evolve the necessary internal processes very rapidly, as well as identify with the firm enough that it was almost like they were operating in the marketplace directly. Hopefully these kinds of firms can expand so there can be larger firms that are effective and empathetic in a way the resort was not.

The alternative would probably be an extension of tipping. This would be an American residue far more poisonous than Agent Orange.

4 A digression here. It’s bemusing how infrequently Doi Moi is tied to Perestroika despite the parallel timing, Vietnam’s status as client to the USSR and the fact that the literal meaning of the terms is near identical. Vietnamese obviously prefer a domestic interpretation, but foreigners are far more likely to relate it to the Deng Xiaoping reforms in China. I guess this is due to the fact that conventional wisdom deems Perestroika a failure and Deng’s reforms a success, so that Doi Moi must necessarily be grouped with the latter. I also assume an orientalist inability to determine diversity in policy aims and culture amongst East Asians leading to an assumption that one oriental communist country must be following the lead of another, even when they were openly at war just years before the relevant reforms (and much of the prior millennium).

I was also told by one Vietnamese that “Vietnam is a poor country. Some places, like Northern Europe may reach socialism, but right now capitalism is good for us” 5. It’s interesting that here at least, there remains the view that socialism is an aspirational goal, or at least the end point of dialectical history. The Mensheviks are still around it seems.

2 Xiclo drivers and motorcycle taxis often also asked “Do you want me?”, a question flattering but unwanted.

3 It was suggested that we take “a boat to Iceland to go diving”, a prospect that was as uniniviting as it was implausible, until I realised he was refering to an “Island” whilst pronouncing every letter.

  1. Warning – This post is quite optimistic. Don’t think I was viewing things through rose tinted glasses (I certainly wasn’t), this is just a focus on the positive[]
  2. fn2[][]
  3. fn3[][]
  4. fn1[]
  5. my emphasis[]

About Richard Tsukamasa Green

Richard Tsukamasa Green is an economist. Public employment means he can't post on policy much anymore. Also found at @RHTGreen on twitter.
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Nicholas Gruen
13 years ago

Thanks for that Richard. The role of firms is as you say an important rider on Smith’s optimism about the market. On the other hand it does keep the disutility of all that haggling down.